Microsoft rejects Motorola settlement terms, Xbox 360 may yet be banned from sale in US

Motorola wants to settle its lawsuit with Microsoft but Microsoft has rejected the company’s terms.

A committee is still deliberating on whether or not the International Trade Commission will block the Xbox 360 from being imported to and sold in the United States. With summer underway, the looming threat of a ban ahead of the holiday season has got to have Microsoft a little sweaty below the pits. The reason the Xbox may be banned is that an ITC judge ruled in May that Microsoft’s console infringes on a number of patents held by Google-subsidiary Motorola.

Motorola doesn’t want the Xbox banned from shelves. It’s ridiculous. All Motorola wants is the royalties it believes its due for its technology. To that end, Motorola offered to settle its dispute with Microsoft provided Steve Ballmer’s company pays Motorola a royalty fee of 2.25 percent of every Xbox 360 sale. That may not seem like a lot of money, but consider this: Microsoft sold just under 15 million Xbox 360s in 2011. As of September 2011, the average cost of an Xbox 360 was $306. Under Motorola’s terms and based on those stastics, Microsoft would have had to pay Motorola more than $1 billion in total royalty fees from Xbox 360 sales alone.

The Xbox 360 wouldn’t be alone though. Microsoft uses Motorola’s ActiveSync technology in not just the Xbox 360, but also the Windows Media Player, Windows 7 operating system, and the Internet Explorer web browser. Motorola is was also looking for royalties from Windows, demanding 50 cents of each Windows sale.

All in all, Microsoft has estimated that if it pays Motorola its desired terms, it will cost the company a total of $4 billion each year.

Microsoft isn’t alone in its fight to keep the Xbox 360 on shelves. Companies like Activision and IBM have filed statements of support for Microsoft with the ITC. Even with their support though, ITC Judge David Shaw believes that Microsoft is firmly in the wrong. He recommended that Microsoft be blocked from importing the console from Chinese manufacturers, selling it in stores, and that any sale of Xbox 360s still in stores in the US should see Motorola getting a 7 percent cut.

The ITC commission has options. It will either uphold Shaw’s decision, amend the decision itself, or ask for a rewritten statement of terms. When they decide on a course of action, President Barack Obama will have 60 days to review and approve it.